MCM Newsletter – Outlook for Week 30 Nov – 4 Dec

Executive Summary:
- Main Trend (weekly): neutral
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): down (updated 30.11.:neutral)

Details:
No significant developments on the weekly cycles compared to last week. They are currently just oscillating and resistances held so far, although the market recovered from the initial drop and stopped close to the resistance levels again. Not too much to add to what we said in the previous newsletter: "These levels are now critical to watch. The normal expectation is still for resistances to hold and the market to head lower until a support level is triggered. But if the market manages to break through and head higher, that would signal an important shift in the character of the market and would be very bullish."

weekly_29.11.

Weekly cycles

After back-testing their break-out levels at 2015 ES and 17100 YM, the daily cycles bounced strongly. In the last newsletter we were mentioning that “Now that the back-test of the up impulse held, there is nothing bearish shown by the daily cycles". The statement is still valid, especially since ES put in a Bullish Retrace (BR) at 2065.25. Normally the market should go higher, until an END resistance is put in. In any case the new support level is important to watch. If the market heads lower before a resistance is triggered and breaks this level, the impulse up might be reversed.

daily_29.11.

Daily Cycles

The 60 and 135min cycles seemed to have put in the short lines in the sand. The 60min started a down impulse at 2090.75, while the 135min is currently just oscillating and had a resistance trigger at 2083. The market was "arrested" between these 2 levels ever since they triggered, not being able to break below nor reverse back above. The levels are important for the short term direction and depending on which one breaks first, market is expected to continue in that direction.

Update 30.11.: the 60min reversed its impulse down and put in resistance at the same level as the one newly triggered on 135min (2095.25). Although the reversal of the impulse down on 60min is bullish, the reaction from resistances was strong and direction is down until a support level will trigger. That will become the next important level to watch for clues if more downside is to come.

60&135_30.11.

60 & 135 min

Updated Projections and Detail Regarding MSP

In this article, we publish updates to the various MSP charts presented on these pages recently. As mentioned previously, there was a bug fix which corrected the significant misplacement of certain MSP points under certain conditions. The comparison and analysis demonstrating this problem is shown below at the bottom of this article. The result of this discrepancy is that the incorrect MSP did not track, but the correct MSP tract as well as one could possibly want. With that, the corrected MSP is showing an inflection point of this week for the S&P 500. Not only that it is showing inflection points potentially building up for the DAX and the bond market. The bond market rally seems to have been a very foreign concept. However, market structure projection got it right so far. Keep in mind, that the most sophisticated work we have done related to the equity indexes and market structure projection is being expanded to many other products - this is a process.

One of the interesting things is that copper and gold, which had a high pressure for a turn in November have not tracked and diverged significantly from their projected behavior. This indicates that something else may be going on, and caution is warranted. In either case, the high probability area for gold to launch a sustained rally appears likely in January.

S&P500 Market Structure Projection

S&P500 Market Structure Projection

US Bonds Market structure Projection

US Bonds Market structure Projection

DAX Market Structure Projection

DAX Market Structure Projection

Detailed comparison of Incorrect MSP versus corrected bug fix

Detailed comparison of incorrect MSP versus corrected bug fix

Inflection Points Expected This Week – As Market Operates In Its BEAR MARKET CYCLES

This weekend we will present a host of unique charts and a detailed discussion of market structure projection, which had a software issue related to the end of November timing for a low - which actually due to a rare condition forward translated erroneously skipping the correct mapping for the week so the 16th. We identified this early last week and updated members, as soon as it became clear that future vs. historical MSP was not agreeing. This bug/error has been fixed and will be discussed in a separate post. However, inflection points are expected imminently if not already in.

The cycle study shown in the large chart below (you will need to maximize or zoom into the chart to see the details) is a robust and proprietary analysis that we use in our proprietary trading systems. The objective of this study is to devine the direction and timing of market movement by backing out its natural oscillations - or waves. As can be seen in the chart below, the red and pale cyan studies at the bottom of this chart show the larger directional move in the markets. They show when a market is trending by magnetizing to the upper and lower bounds. This means the 100 and 0 levels. Persistent travel at these extreme bounds indicates a trending market as well as the direction of the trend. When markets attempt to change course, a period of questioning is required. These market questions show up as volatility or could be called CHOP. We are currently in a pronounced stretch of zero bound attention which usually occurs once a change direction has successfully occurred. These tools defined the change of direction in June and July this year from UP to DOWN and likely into a bear market. They could not have had better timing. The objective of these analyzes is non-latent and simple, we think that this has been accomplished in the chart we publish on this page.

Additionally, there is another condition occurring similarly to 2007. While it is not our objective to show systematic trading as an indicator. The RVS is an old and established trading system that has unique qualities currently potentially acting a bit like a larger-term indictor. RVS trades only with what it feels is the prevailing trend. During the last five years. While it has had many losing individual trade elements. It has scarcely had a losing model position since 2009 and its releases in 2010 and 2012. This means that every position, including all the entries required to build a position on an NET-BASIS, resulted in a profit this makes the system stable and persistent which is why we trust it and have not changed anything about it in years. Due to the characteristic of the system's trading only in what it perceives to be the prevailing market direction it believes most probable...and its ability to trade profitably and consistently through whipsaws that usually accompany changes in direction in the market, this system is now setting up a pattern almost identical to 2007. Within the cycle analysis, we are presently likely in initiating bear markets, similar to 2007. As such, RVS believed we were in a new bear market starting in July and profitably shorted (albeit small) the September and October bounces. The reaction of the markets since then has created the perception that the Bull-Is-Back. This can be seen via the many Elliott wave counts and technical analysis calling for new highs, dramatic or astronomical new highs. We believe that most of this analysis is founded in an emotional basis and lacking reliable or factual data.  This reaction the markets also has so far attempted to convince RVS that longs are the preferred trades. If the expected inflection points play out and the cycle directional trend analysis is accurate, this phase for RVS should become a similar whipsaw as in 2007 and regardless of if markets make new highs (as in 2007)  the system should soon revert to a preferred bias towards short risk.

RVS & Market Cycle Study

RVS & Market Cycle Study

Inflection Point Approaching

We will be posting a detailed article with updates to market structure projection which is suggesting and early month inflection point in December. However, plus or minus two or three trading days would not be surprising. Therefore, while it should be expected that we get a bounce as the new month kicks in, this bounce could be to a high. In either case, market structure projection is suggesting a potentially difficult period or balls ahead so it is a good idea to be alert for any weakness, as surprises are likely to come on the downside.

This article is not about market structure projection. It is about additional information which is representing the quality and behavior of this current move. We have discussed consistently, the Russell 2000 and Mid-caps 400 in the lounge and on the site. Earlier in the week we pointed out that daily resistance cycles would likely trigger if weakness of any decent quality occurred for these indexes. This has been the case, and currently the charts shown below show an unconfirmed daily resistance cycle shown in dark magenta. At the end of today, the cycle will confirm at whatever price marks the recent high and the cycle indication will turn bright magenta. This cycle is significant in a few ways and may suggest a clean rejection of prices if it is respected.

Not to be left out, the equal weighted S&P 500 index is represented below and has been showing ever increasing weakness, which translates to declining breadth, for the S&P 500 components. The index can be seen in cyan below. Additionally, the ratio of the equal weighted index to the cash market capitalization weighted index is shown in red. We can see that during this rally there has been a dramatic underperformance in the equal-weighted index ratio to the capitalization weighted index. All this suggests, less than reliable participation and large liquidations occurring within this up, move.

S&P500 Composite Index to Equal Weight Index

S&P500 Composite Index to Equal Weight Index

Russell 2000 and Midcap-400 Daily Cycle Charts

Russell 2000 and Midcap-400 Daily Cycle Charts

MCM Newsletter – Outlook for Week 23-27 Nov

Executive Summary:
- Main Trend (weekly): neutral
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): neutral

Details:
After reversing the down impulse by getting the resistance levels at 2110.5 on ES and 17907 on YM, the weekly cycles are currently just oscillating. The market headed lower from resistance, but last week managed to recover and is now getting close to test the resistance levels again. These levels are now critical to watch. The normal expectation is still for resistances to hold and the market to head lower until a support level is triggered. But if the market manages to break through and head higher, that would signal an important shift in the character of the market and would be very bullish.

weekly_22.11.

Weekly Cycles

The daily cycles back-tested their break-out levels at 2015 ES and 17100 YM and bounced strongly. In the last newsletter we were mentioning that “at least a short term bounce is the normal expectation” and the market delivered that and then some. ES bounced more than 90 points from bottom to top. Now that the back-test of the up impulse held, there is nothing bearish shown by the daily cycles. Normally we would expect the impulse to really take off after a successful back-test. The resistance on the weekly cycles cast doubt on that, but if they fail and market manages to push through and impulse up also on the weekly, then that would likely lead to a strong move up.

daily_22.11.

Daily Cycles

The 60 and 135min cycles seemed to have diverged a bit towards the end of last week. That is not true, of course, since 60min is a fractal of the 135min. But it was interesting to see that while 135min was still in the impulse down started at point 1 on the chart, the 60min actually started an impulse up (point 2 on the chart). Now both time frames seemed to have finished their impulses (point 3 on chart), with 60min having an END and 135min a 2nd END. 135min also triggered a resistance level after that 2nd END, so it could trigger a 3rd END or it could be oscillating already. In any case, considering that both had resistances show up, the normal expectation for the near term would be a downward movement, at least until a support level is triggered.

60&135_22.11.

60 & 135min cycles

 

 

The Last Gasp – Failure of Intervention

In another rhyme mentioned early in 2015 on these pages, the MCM gap index almost all major tops occur with a panic of intervention and last gasp buying that attempts to levitate prices and hold up an index. What we can see below is the exact a situation that occurred in 2007 near the highs, the highs were put in any large effort was made to panic buy and or intervene, generating a blow off in the gap index shown at the number [1]. Similarly, in 2015. We see a blow off in the MCM gap index. This blow off produced lower prices. Think about that for a second, the largest panic buyer and intervention efforts of the last years produced no effect, and in fact lead to a mini crash. This action in the MCM gap index is the emotional sign of the equivalent of a last gasp and the results should not be that different from previous history.

mcm GAP INDEX

mcm GAP INDEX

Gold Market Structure Projections Suggest Problems Ahead for Risk Assets

We posted a few weeks ago, market structure projection gold has reached its inflection point at [1] in the chart below. While a smart 3 to 4-week bounce which could be significant would be reasonable, important point to note, is that goals has reacted at its expected timing and if we get a strong rally. The goal chart below suggests that the reaction to the Fed policy adjustment or activity may not be nearly as rosy as the stock market would like it to be. This chart says danger ahead. Last goals. Investors think that they are out of the woodshed, it also appears that after this rally a new low in January for gold is a high probability. The most bullish scenario for gold would be if a low in January was a divergent low meaning that it has a higher low than the current low. This is not currently the preferred view, but it is a distinct possibility and if it were to occur with the market structure low implied for January it could suggest a very large gold rally.

Gold Market Structure Projectons

Gold Market Structure Projections

S&P500 Market Structure Projections

S&P500 Market Structure Projection

S&P500 Market Structure Projection

Since, people are sufficiently frustrated and confused to be heckling and both negative implication and positive implication posts and articles. I figured it was time to update the market structure projection as we are getting a balance within a downtrend. The bounce is larger than I would have preferred but most likely is a bounce meeting a downward push. Normally, the first few days of December are probable of being bullishly inclined, hence the question of whether the low that we got last week was dramatically left translated as shown in the first box on the start or whether it needs to average to itself somewhere in the middle around the marked [1] comes up. Currently, systems that were holding long trades closed out yesterday at the close, which suggests that this rally is ripe. Moreover, we are approaching a time when people are looking for Santa Claus, yet all the data. This analyst sees suggests Santa Claus may not have quite so much spry in his step this season. We are entering the phase of weakness mentioned on these pages over the last weeks, which suggests downward bias into February or March next year. The posted NYSE charts also provide anecdotal evidence that we are at a pivotal market point. We suggest that you take a look at those charts again as the Hindenburg omen's their placement timing and patterns overall are concur with market structure projection at this time.
of being bullish of

Update Regarding NYSE Levels Chart From Yesterday

Yesterday, the NYSE index showed significant weakness, and normally would have faded below the cyan level marked below. This being a FED day, we mentioned that if the cyan (10,300ish) level was recaptured the primary degree (Yellow) level would likely be a magnet. We are currently sitting at that retest today which should be a much bigger challenge and potential reaction for the index. Additionally, the 20day and 100-day moving averages are right at this level. Either way, the picture remains the same. In fact, the action of large caps today is even more suspect because their visibility and earnings are deeply impacted by the strength in the dollar - which is not something the FED can not easily compensate for with QE or rates.

NYSE Levels

Particularly Grave Setup in NYSE – Fly In the Ointment or Ointment on the Fly?

Earlier today, we mentioned the grave set up occurring on the NYSE. Almost all analysts seem to be missing this, especially most wave analysts. The reality is that we have a succession of three clusters of MCM Hindenburg omen's, all of which marked major turns within the recent market structure. This is nearly the identical set up as what occurred in 2007 and 2008. We are not Hindenburg Omen enthusiasts, the MCM Hindenburg is another matter entirely and is extremely bearish accurate and very rare. The MCM Hindenburg Omen shares one thing in common with normal Hindenburg's: "Clusters of them should be interpreted as being dangerous". We have a particularly large cluster and particularly ominous pattern.

Additionally today, the NYSE attempted to break over a previous levels chart resistance. It failed on this attempt. Action like this is symbolic of failure to recapture a previously broken support, which became resistance and which is now resistance again in a more significant way since we have fallen beneath it again. While it is possible to be recaptured but it is not necessarily the greatest odds, however, if it is recaptured and especially if we break above the yellow primary degree resistance at 10430 or so - that is a good warning that the up move may be extendingThis exposes the meat of the thin zone, which targets a significant drop if it were to be filled. As can be seen from history on this chart, thin zones are usually filled in quickly and accurate.

NYSE Hindenburg and Tops Comparison

NYSE Hindenburg and Tops Comparison

NYSE Detail

NYSE Detail

NYSE Big Picture

NYSE Big Picture